National Office Cap Rate Report


National office cap rates compressed by just over 20 basis points during the fourth quarter of 2020. The national average declined to 6.84%, marking the first time the average rate fell below 7.0% since Q4 2019. The Q4 2020 average cap rate is also below the four year rolling average of 7.06%. A quarter-over-quarter decline in rate was experienced across all regions around the country, with the Pacific, Northeast and Mountain regions experiencing the largest cap rate reductions. Although the cap rate reduction is a positive trend, the reported decline is based on significantly reduced transaction volume, with only 193 sales during Q4, compared to the four year average of 519 sales per quarter. On an annual basis, the 1,124 sales recorded in 2020 represents a 50% reduction from 2019. Also of note, Q4 2020 was the third-worst quarter on record for U.S. office demand with 28.4 million sq. ft. of negative net absorption. The negative absorption pushed overall vacancy up 90 basis points during the quarter, to a current level of 15%.

Office_Trends_Graph_Q4_2020

Source: Valuation VIEW
Data points are confirmed closed transactions adjusted for assumed financing and reflect overall market trends.


U.S. Office Cap Rate Trends


Office_Cap_Rate_Report Table_Q4_2020

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